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A large Midwestern health system determined
it could no longer sustain the financial losses it was absorbing
from operating its 70-physician primary care network without
increasing the physicians' share of overhead expense. When
the physician leadership was notified of this expense-sharing
plan, they determined they would prefer to no longer be a
part of the health system.
Sinaiko Healthcare Consulting, Inc. was retained by the health system as an independent third party to facilitate a transaction separating the physician network from the system. The crucial dimension of Sinaiko's mandate from the health system was to achieve a definitive conclusion to the losses from operating the physician network while still preserving the system's relationship with these key medical staff members.
Sinaiko's initial task was to conduct independent meetings with
the health system board and the physician leadership in order
to identify options for how this separation could best be accomplished.
The Sinaiko consulting team then facilitated the entire transaction
process over a 12-month period, including: (1) Developing specific
term sheets; (2) Attending a series of informational meetings
with physician leadership, legal counsel and financial advisors;
(3) Negotiating deal points at both the group and individual
levels; (4) Working with legal counsel to create transaction
documents; and (5) Evaluating the financial performance of the
network - and even individual physicians - in order
to issue the required Fair Market Value opinions, which Sinaiko
did concurrent to the close of the transaction.
The net result of this engagement was that approximately 50 of the original 70 physicians chose to associate with a newly formed, single independent physician group. The remaining physicians either became independent practitioners or left the community. Most importantly, the relationship between the health system and the physicians was maintained and the new physician group is performing well. |
